Misterious Marfrig: is the stock price being manipulated?

Here we are again talking about Marfrig. After all, the old adage says “if there is smoke, it can be fire.”After several fraud accusations (here,here and here), Marcos Elias’ research firm Empiricus is now questioning Marfrig’s misterious stock purchasing strategy by its main shareholder.

The repurchase of shares​​by a company itself is usually seen as a positive – it isasign thatmanagement believesin thecompany’s prospects. But what is happening with Marfrig, Empiricus says, is thatthe company’s main shareholder(Marcos Molina) and his wife are purchasing shares with their own money, no matter at what price. Marfrig’s shares are down 41% so far this year.

Molinasaidin a statementthat heboughtsharesmotivated by the“solid foundations oftrust in thecompany andits significant potentialfor value creation.” But hedoes not seeminterested in seekingthe lowest price – actually he is buying stock at any price.

Molina‘s ownershipin the companyhas shot upto 47%.

According to Empiricus (via Exame), the share purchases were initiatedonNovember 11, but Molinaseems to havebought stock withoutthe logicof the participantseekingthe lowestvalue. Through his brokerage house Umurama, Molina’s acquisitions are concentratedin the last15 minutesof trading sessions, no matter at what stock price. Empiricus says that “thetrade patternofUmuaramais, at minimum,unusual. In the period fromSeptember 29toNovember 24, on average40% of purchases were made inthe last15 minutes”

“Every day, we received noticesfrom traders saying thatMarfrig’s shares are being manipulated. We do not haveenough evidence yet about thismanipulation, but we find them unusual and suspect,” says Empiricus. Marfrigwas contacted, butdeclined to commenton the subject.

Only time will tell if Empiricus is right in portraying Marfrig as the “Brazilian Enron”.